SMART MONEY CONCEPT

ALL IN 1 SMC TRADING CONCEPT FOR

ALL FOREX TRADER’S

The Ultimate Market Structure, Volume Profile

Analysis, Liquidity, Order Block, BOS, Order
Flow, Price Action, Supply and Demand SMC
Trading Concept

DAVID WOODS
 Copyright ©️2022 DAVID WOODS
All rights Reserved
No part of this publication may be reproduced, distributed or transmitted in any form or by any
means including photocopying, recording, or other electronic or mechanical methods, without the
prior written permission of the publisher.
 DEDICATION
I David Woods, has written this book SMART MONEY CONCEPT as a trading guide and it’s
dedicated to all Forex trader’s, learner’s and newbies who are interested in learning and trading in the
forex market including old traders as well with little or no experience, but still dedicating time and
effort in doing what it takes to win in forex trading, instead of giving up and shying away from their
dreams of becoming a successful trader. Without you this book wouldn’t have been written and
published. I hope you read carefully, understand and implement everything learnt in this book and I
wish you all the best in your trading journey.
 Section 1

LIQUIDITY

The Liquidity definition refers to the extent to which a particular asset can
be bought or sold quickly on the market without having a significant effect
on its price. Liquidity is an important factor that investors assess when
making their trading decisions since it has an effect on their trades. It lets
them know how quickly they can gain access to the market and how fast
they can profit from trading a particular asset.
Types of liquidity:

Trendline liquidity, support and resistance—which I will also classify as a

range in some cases—and EQL and EQH—which I will classify as double
bottom and double top in other cases—are the three types of liquidity that I
focus on because I believe they are the most important to be aware of.

Traders who are looking for uptrend liquidity want to buy near trendlines or
wait for breakouts to go short, and vice versa when looking at downtrend
liquidity.
As we can imagine, this creates a lot of liquidity in these areas, so the market
will typically manipulate to grab liquidity prior to a larger move.
If we enter EU, we will, for instance, be looking at a down trendline,
indicating that we are clearly bearish, putting in LLs and LHs. We performed
three taps on this trendline; notice how precisely the wicks are moving.

Now, this isn’t just a coincidence because we know that people with a lot of
money or big institutions know that people in the retail industry are looking
for these kinds of patterns and will manipulate them to get them to join the
market.
Now that we have to look at the third tap of the trendline, we can see that we
had a nice reaction, a retrace candle, which gives us all the signs that we
should enter.
Retail traders, on the other hand, are looking for this trend to continue, and
their stop loss will likely be above this high, which is also above the
trendline.

This is the deal, so let’s see how it goes. We get a nice push down, and they
are making money. However, the price has reversed, and we have broken
above this high and the trendline.
The liquidity in this trade is basically taken from the sellers. However, there
are also breakout traders who see this as a break of the trendline, a break of
the higher trendline. They have buy stop orders above the trendline, so
something like this, and they probably want to target the 90% at this
descending channel.
Since we are aware that they trigger the buy stop, what is likely to occur?
Retail traders are making a small profit, and then the price ranges, forming
an EQH, and finally reaches that new low.
We have therefore taken liquidity away from sellers and buyers, giving us
the fuel to actually move the market.

We will now examine the second type of liquidity, support and resistance—
which, in my opinion, can be considered a range in some instances.
Therefore, traders believe that support is a good place to buy; if we examine
this chart, we can see that the price has moved up and down three times.
However, this also serves as a form of support and resistance because the
price has remained the same three times.
As a result, we have buyers who are selling and traders who are looking to
buy more; as a result, there is a lot of liquidity above and below support.
Because of our position sizes, we are able to buy and sell at any time, which
is unlike us as typical traders. However, this is not the case for large
financial institutions and banks, who have a lot of money and need to buy
and sell.

Now, from this pattern, we typically observe a support where liquidity is

typically taken before price reverses and takes liquidity from this resistance
or by side liquidity before reversing once more.
As a result, backing up the chart, we will demonstrate that the trendline
liquidity, support, and resistance are all manipulated. So, as we can see, there
is an up move in the trendline, with four touches perfectly matching the
trendline. On the third tap, maybe buyers are getting involved, but on the
fourth tap, there are definitely buyers getting involved. Stop losses should be
below this low, and we should be looking for higher prices.
Although price does rise, we form EQH in this region, and price then
reverses, suggesting possibly some BE, price did not break any structure
from any highs.
Because we know that there is liquidity at every market high and low, which
price tries to move to in order to get that needed liquidity, price returns to
take liquidity from any buyer from before. If we have buyers who got
involved at the third tap, it is likely that they will be, if they are holding their
trade.

As you can see, we wick it here, pull back, we BOS, and we break this
trendline, so we have sell stop traders or people with the breaking retest
looking at this to get involved short for anyone seeing a break of the
trendline.
As the price rises again, we establish EQH, also known as resistance.
As a result, sellers are getting involved, and the price pushes off and then up.
Therefore, this is merely a liquidity sweep of these highs. We have taken
liquidity into account, and we can see that the next two candles have a lot of
momentum. These two candles are the same size as the whole range here, so
price is moving now.

As a result, there is a push down to this low point; we will EQL and observe
what transpires next.
So the price fell below that low and then rose again, probably as a result of a
leftward-moving area. However, what can we notice about this price turn?
Since we have EQL here, we are aware that liquidity exists below it. As a
result, price wicks it here, merely grabbing liquidity, and then price reverses
and BOS.
As a result, if we look at the following example on USDCHF of EQH, we
can see that we previously had a series of LLs and LHs, so we BOS, and
what we can do to LTF now is refine this down.
As we have already learned, this 1 hour wick I have marked off with this
zone is just an AOI on LTF; consequently, this 15 minute wick will be an
OB or a supply zone where we can short.

But if we zoom in, we can see that we are still below the LH, that we are
breaking structure, that we are pushing up and actually breaking above this
structure here to mitigating this wick, and that we can see that mitigating
doesn’t have any momentum; it’s just a corrective candle because price is
taking liquidity from this EQH.

If we go to 15 minutes, we can clearly see the EQH, and we can see the OB,
which is the
MORE ON TRENDLINE LIQUIDITY
If you’re a retail trader, you’ve probably seen ads on the internet for buying
and selling trendlines. You might be wondering why you can’t make money
trading trendlines! Try not to be mixed up, I’m certain that are a few dealers
out there who are bringing in a Ton of cash using Trendline Support and
resistance!
This might be of interest to you if trendlines aren’t working for you!
This is because institutions and major players are interested in the
“OBVIOUS” trendlines, which they frequently use as a source of liquidity.
So, what does that imply?
Getting Close to the Trading Setup
Prices are making higher highs and higher lows.
Prices are bouncing off the ascending trendline.
Clear Take Profit and Stop Loss area for execution.
We meet all of the requirements! Let’s try it!

The harsh reality

We get stopped out and wonder what went wrong. Our way of thinking is as
follows:
We have structure in our favor because the stars were aligned. Prices are
creating higher highs and lower lows; we should expect higher highs!

Break of structure into supply zones

We are aware that this trendline COULD be an area of liquidity, anticipating
prices to break through and leave behind a Supply zone for us to SELL from.

How do we determine which Supply Zone to utilize? Zoom in on the Price

Action, please!
Prices tapped in the first supply zone created this “Inside Bar” formation,
which retail traders might be looking for a SELL STOP order below the
Inside Bar that was activated.

However, we are aware that prices did not intend to move bearish at this
time. We did not yet observe a significant sell-side move or a structural shift.
Impatient and emotional traders enter the market at this point, eager to be
first in line.

Prices tapped into the second supply zone, gave us a “strong” rejection,
breaking out of a minor structure (swing low), leaving imbalances and a
refined order block for us to sell from on the shorter timeframe (8 hours).
Entry Method on the Shorter Timeframe [8-hour]
There are 3 approaches we could have taken to this trading setup:
Sell limit order at the refined zone (H8)
Market Order following the breakdown of the Rising Wedge Pattern
Market Order following the breakdown of the Wyckoff Distribution
“Does this always work? ”
Obviously not; nothing works every time!

“How might we trade the Ascending Trendline instead? ”

1. Wait for a distinct break in the structure on the timeframe you are trading.
2. If prices intend to move higher, the break out would have left imbalances
and order blocks behind, which prices would eventually overcome.
3. We wait for the transfer of “Weak hands” into “Strong hands” via…
Wyckoff Distribution
Falling Wedge Falling
Channel Double bottoms (I don’t use them) in order to confirm the order
blocks and refined zones.
 Section 2
MARKET STRUCTURE

How to Use Market Structure to Identify Order Blocks

Let’s just use this area so as not to confuse the example. Here, we can clearly
see that prices are making higher highs and higher lows, and that changing
trends are making lower highs and lower lows. Let’s use the change in trend
as an example to find a clean order block.
This is what we are attempting to accomplish when looking for a trend shift,
and I believe that this actually gives us the best chance of reaching high RR.
The RR decreases when price is in an uptrend because it is moving toward a
target and won’t stay there forever. Every time it moves, it gets closer and
closer to that target. Price has reached its target or POI and is now moving
back to another (supply and demand, buyers to sellers), so you have a huge
chance of really hitting good RR. It caught price within that clear and clean
break of the trend.
This is the 1H timeframe, so the potential on this timeframe doesn’t look
great. However, an entry here on the 1M based on bias from the 1H period?
We can obviously see that cost broke past low, and couldn’t break past high.
Due to the price breaking the structure to the downside, we now have a
change in trend and a strong order block.
When we zoom in on the area, we can clearly see our structure and order
block breaking down. Let’s say I’ve tweaked this order block a little, but you
can see that the price tapped into it before falling. And as it descends, it taps
into additional order blocks until changing trend once more. You simply
need to wait for the price to approach, refine your order block down to 1M
or even 5M, and then use your knowledge of Wyckoff to help give you
confluence that this is a confirmed change in trend and price will continue to
fall, giving you huge potential with regard to RR. If you followed this chat
on a higher time frame to avoid confusion on the Lower timeframe, you will
have identified this change in trend.
TYPES OF STRUCTURE
We use four different types of structures.
Swing Structure
Minor Structure
Sub Structure
Change of Character (CHoCH) .
Swing Structure
Swing structure truly defines the directional bias of the market. By
illustrating what we ought to expect from a “bigger picture” perspective,
This lets us know if the trade we’re taking is in favor of or against the trend.
The true HH & HL or LH & LL of the market is the swing structure, which
is always the lowest or highest point prior to a BOS.A significant event
known as a break of swing structure (BOS) has the potential to alter overall
directional bias.

Minor Structure
Minor structure refers to a structure that was present in a previous leg but is
still contained within the swing points. As the market begins printing new
HH & HL or LH & LL, it provides us with the first real confirmation that the
pullback has ended. A break of minor structure (BOS), on the other hand, is
not sufficient to demonstrate a complete shift in directional bias.

Sub Structure
A sub structure is a structure that does not break anything in a previous price
leg. Although it is much less significant than Swing or Minor, it is useful for
continuations. Breaks of substructure (sBOS) can frequently be faked out, so
be careful with them.
Change of Character (CHoCH)
The first time a LH (bullish CHoCH) or HL (bearish CHoCH) is removed
from a chart is known as a CHoCH. It allows us to identify the initial shift in
sentiment. It should be used after a liquidity sweep and is always used within
HTF POIs that are relevant to the timeframe you are on.
If the HTF narrative is accurate, we may use CHoCH in an excessively
aggressive manner. We will only use wick breaks and very minor structures,
like an inside bar, that we would not normally consider. By being forceful
with this, it permits us to get in at the most readily accessible open door. But
the HTN needs to be right because using such a small structure in the wrong
places can cause losses. Additionally, it provides us with the best estimate of
the extreme that may be mitigated.
To be valid, a HH, HL, or LL, followed by a LH, must occur quickly.
What do we Understand as Market Structure in Trading?

Our knowledge toward trading opportunities is due to the structure of the

market. In the bull market we always look to buy dips, range we look for
buy low, sell high.
Principles of Market Structure
Price moves within a structural of support and resistance.
A breakout of the structural of support or resistance will lead to price
movement in the next area of the support or resistance.

Elements of the Market Structure

The market structure is made up of Phases and Trend
Phases.
How does the market actually function?
All financial markets work on the universal law of Supply and demand.
Law of Demand: When an item’s price is higher, there is less demand
(buyers don’t want to buy at a higher price) and when the price is lower,
there is more demand (buyers want to buy at a lower price).
Law of Supply: When an item’s price is higher, there is more supply (sellers
want to sell at a higher price) and when the price is lower, there is less
supply (sellers don’t want to supply at a lower price).
Smart money are nothing more than professional money, big hedge funds,
and institutions. If you want to be a successful trader, you need to understand
where these smart money place themselves and where their orders are. If you
don’t know this, you might get trapped by smart money
The price goes through four phases:
Accumulation
Uptrend
Distribution
Downtrend
Accumulation
Accumulation refers to being removed from the floating supply of stock by
buying. Demand coming in to gradually overcome and absorb the supply and
to support the stock at this level.
How do smart money do that? They buy as much of the stock as they can
without significantly raising the price. This continues until there are few, if
any, shares available at the price level they have been buying at. The supply
area is where the smart money makes sure that stock stays below a certain
upper level. The smart money, on the other hand, backs prices above a
certain lower line, known as the support area.
Accumulation typically takes place within a clearly defined congestion area,
where the stock appears to have no interest in either moving up or down.
How do Trends Change or Shift
Testing of supply (testing supply whether it is present or not) Mark up (if no
supply is found in testing action)

We will discuss this more in subsequent sections.

Stopping action (stopping the downtrend) Change of character (changing the
strength of the trend from bearish to bullish).
There are numerous different examples that imply accumulation. Some of
them are
Adjusting bottoms,
Reverse head and shoulder
Double bottoms designs
Triple bottom pattern
Uptrend

When the supply is seen by smart money. The Smart Money can then mark
up the stock’s price when general market conditions appear favorable. First,
the market breaks out of the accumulation phase and moves steadily higher
with average volume. The insiders have bought at wholesale prices and now
want to maximize profits by slowly building bullish momentum. This is
because the majority of the distribution phase will be done at the top of the
trend at the highest prices possible. There is no rush. Again, if given the
opportunity, we would do the same.

DISTRIBUTION
The smart money will begin selling the stock back to uninformed traders and
investors in response to the rally’s higher prices in order to profit. This is in
contrast to the accumulation process.
DOWNTREND
The Smart Money will then be able to reduce the stock’s price in the future.
Let’s combine all phase

The smart money is only playing on the markets’ emotions, which are driven
by just two factors. Greed and fear. That’s all. People will buy if there is
enough fear. People will buy if they are sufficiently greedy. Everything is
straightforward and logical. The cycle of accumulation and distribution
continues indefinitely across all time periods. They occur every day and in
every market, whether they are major or minor.
Trends:
First, let’s define what a trend is. In a healthy bull trend, the length of the
upswing is typically longer than that of the downswing, resulting in higher
highs and lower lows. The reverse is true for the bear market.
Why Trends Analysis for Trading
One of the most common reasons traders fail is trading against the trend,
without a trend, or with low-quality trends.
Controlled arrangement of price bars and pullbacks into supply and demand
increases the certainty that reversals at supply and demand will occur. Poor
or weak trends have lower predictability, and uncontrolled arrangement of
price bars and pullbacks into supply and demand reduces the likelihood of a
reversal.
Identifying the market trend According to the Dow Theory
The market has three primary trends. The primary trend is also regarded as
a major market trend in Dow Theory. It has long-term consequences
Secondary trend: Dow refers to a secondary trend as a correction in the
primary trend. The secondary trend will be a rally in a bearish market and a
downward movement in a bullish market.
Short Term trend: The Minor Trend is a corrective move within the
Secondary Trend.
Which is the Best Timeframe Trend?
It depends on the time period in question.
The trend is established and dominated by longer timeframes.
If price is making higher highs and lower lows on a daily basis, we are in a
bull market.

On the other hand, if we observe a retracement of that bull move in the 30

minutes time frame, we may be in a short-term bear market despite the
overall market being bullish.
UNDERSTANDING THE MARKET STRUCTURE THROUGH THE
SWINGS
Understanding the swing through the lens of market structure is comparable to
learning a new alphabet: once you comprehend the characters, you are able to read
the words, and once you are familiar with the words, you are able to read the story.
The main letter to dominate lets you know what market movement causes the
development of a momentary high or low. The meaning of all market structures
will begin to make sense to you once you understand this fundamental concept.
A market swing, or up-down wave, is how the market moves. While the opposite
is true in a bear market, the length of the upswing is typically greater in a healthy
bull trend. Therefore, by observing the swing of the market, we are able to gain
insight into the structure of the market and determine whether the market will
move up or down.
Swing high and swing low
The criteria for drawing the swing high and swing low are as follows:

SWING HIGH OR SWING LOW MUST CONTAIN AT LEAST 5 BAR. The

middle bar must be higher high and higher low than the two proceeding bars and
the two following bar

Restriction for drawing swing high and swing low

If the bar high is parallel to the middle or high(LOW) bar, it does not count as one
of the five bars in the swing HIGH (LOW) because it does not have a lower
high(HIGHER LOW) than the middle bar
TWO ADJACENT swings high or swing low may share bars
 1.

A swing high
2. B both swing high and swing low, this occurs because two proceeding bars
and two following bars are inside bars, which fulfills the requirement of the
middle bar must be the highest or lowest point of five bar sequence
3. C both up and downswing by sharing bar
4. D requires six-bar to form a swing high as the fifth bar is equal high to the
middle bar Why important?
Why are they important
The market makes these points rather than at random. They symbolize short-term
shifts and the forces of supply and demand. The market did not rise above the
swing high for the bulls. This indicates that nobody was willing to offer a price
higher than the swing high at that time. Traders saw no value above the swing
high. In a nutshell, price action reading requires two essential skills:
Consider how likely a swing pivot will hold up as support or resistance.
Understand the implications of a swing pivot not holding up as
support/resistance
There are two types of swings:
swing high and swing low.
Let me explain swing low (SL).
 The
market attempted to move lower. The bullish trend then resumed after it came to
an end. The market reached a new trend high after overcoming all resistance—the
swing high. To put it another way, the market’s attempt to fall was disastrous. The
lowest point it’s pushed to is called swing low.
Valid pivot only makes sense in the context of price action that is trending. You
need to know where the trend started and where the last extreme trend high was to
find a valid low. What about point B, then? Point B is called a LOW, not a swing
low.
Swing low
Every market has a short-term pullback that is shallow and some last for one
swing . The point at which a pullback becomes deeper and lasts for multiple
swings, forming a LOW. The deeper pullback eventually ended, and the trend
resumed. When the price breaks above the previous extreme price high, a low
becomes a swing low, signaling the beginning of a bullish trend again. Let me
show you an
illustration.

All of the ideas discussed above apply to swing highs and highs.
HOW TO KNOW WHEN A LOW BECOMES A SWING LOW
When the price reaches the level above the swing high. The market must form a
price bar that is completely above the price level in order to clear a level. This
indicates that the market has cleared above a price level when a bar low is higher
than that level.
Understanding Market Swings in Advanced Candlestick Analysis
Now that we know how to determine swing high and swing low.
Let’s look at:
Swing momentum
Thrust, and pullback
Volume
to determine strength and weakness or trend.
What is momentum?
The rate at which prices change over time We are just looking at price action to
see how quickly prices move right now and how quickly they have moved in the
past. The slope (angle) of price movement can be used to identify momentum on a
chart.
The same principle applies to price action on charts. Changes in the price action’s
slope (angle) reveal changes in momentum.
Momentum analysis does not measure momentum’s absolute value; rather, it
compares the momentum of the current price action to that of previous price
action.
We can compare through:
Candle
Swing
Momentum through candle
Compare the momentum of the current candle to that of the previous candle (see
BAR COUNTING
1. The number of bars in a half cycle and comparing one-half cycle to another
(previous half cycle)
2. Comparing each swing (relative strength of move)
3.

How much time to get up or how much time to get down

Momentum through swing
1. Compare the momentum of the current price swing to that of the previous price
swing in the same direction
2. Look at the force of the ongoing cost swing with the force of the past cost swing
the other way.
3. Is the price right now rising or falling? What is that implying?
1)

Can we make a comparison between the momentum of the current

price swing and that of the previous price swing in the same direction?
 Now
let’s remove the downswing and study what it is showing Is the price faster or
slower than before?
Compare the slopes of (a), (c), €, and (g) UP swings. Take note of the slower
speed on each of these legs, which suggests a decrease in bullish momentum. On
the optimistic side, weakness is surfacing.
Clearly demonstrates a decline in upward momentum.

Now
insert the same chart with only downward momentum.

Compare the slopes of the upswings (B), (D), (F), and (H). Each of these legs is
moving faster, indicating an increase in bearish momentum. Price swings that are
bearish are getting stronger.

By
comparing the swing, it suggests that bearish momentum is growing. Price swings
that are bearish are getting stronger. It is more likely that the price movement will
continue in the direction of strength rather than weakness.

2)
Can you compare the momentum of the current price swing to that of the previous
price swing that was in the opposite direction?
which means contrasting the previous bearish swing with the current bullish
swing; or contrasting the previous bullish swing with the current bearish swing.
Take note that the slope of (a) is significantly steeper than that of (b). When
compared to the previous downswing (a), the most recent upswing (b) has shown
signs of weakness. Strength continues to trend downward.
The bullish upswing (d) moves faster than the previous downswing. whereas the
strength is currently favorable. Strength is now clearly on the bullish side, as
evidenced by the shallow angle of downward momentum in comparison to the
steep rise of upward momentum.
The price movement is expected in the direction of strength and against the
direction of weakness.

3) Is the current price accelerating or decelerating? What does that mean?

 Section 3

PRICE ACTION IMBALANCE

Understanding price imbalance is crucial because it has incredible power.

Therefore, when either buyers or sellers acquire control over a certain piece of
price action, imbalances arise. Where, in essence, it creates market gaps. We can
rebalance price before continuing or continuing in that route because that price
will eventually return in the future. Therefore, if there is a bearish imbalance, it
signifies that sellers have mostly controlled the movement of price down and that
purchasers haven’t had a chance to participate. In other words, when there is a
bullish imbalance, buyers take charge and sellers stay out of the majority of the
move. As a result, imbalances exist across all timescales. Therefore, we shall see it
occurring on every timescale, from the monthly down to even a second. And if we
look at the chart to see how this works, we will begin to see the markets differently
and see how price can sometimes properly correct imbalances before moving in
the opposite way. Price imbalance occurs when the wicks do not meet or when we
acquire a big, monumental candle. The simplest method for me to illustrate this is
with the example below, in which we will examine three consecutive bullish or
bearish candles.
1. We can see that there is selling pressure because there are three consecutive
bearish candles in this case. Due to the fact that the wicks are meeting, this price
action can now be categorized as being balanced. What does that imply then? If
we look at the first candle’s low point, we can see that it was down here. After
that, the price rose, and this candle began to fall. Now, the top of the third candle is
touching the bottom of the first candle. As a result, it is clear that there is no
longer any imbalance. Price has decreased, pulled back a little bit, decreased once
more, and then pulled back to rebalance and meet the top of the third wick and the
bottom of this wick.
2. An imbalance would be this, where we have the same situation with three
candles, but we can see how the bottom of the first wick is not touching the top of
the third wick. Therefore, this entire movement from this wick to this wick, this bit
of trading in here, and this selling pressure are referred to as an imbalance. We can
therefore see where the wicks do not meet. So an imbalance is essentially that.
This is not effective.
3. Now that we have three consecutive bullish candles, we have the bullish
example.
Because the top of the first wick and the bottom of the third wick are touching,
this price action is balanced, which is another word for efficient. Thus, the price
action is effective.
4.

With regard to the imbalance, the same thing can be seen: there is a space
between the top of the first wick and the bottom of the third wick. So, this is
where the imbalance is.
 I’m
going to travel through EU now. I have therefore identified certain OBs and
imbalances.
Zooming in on this portion of price action, we can see that there is a bearish push
with 3 candles coming down. If we take the low from the first candle, which is
here, and the high, we can see that there is an imbalance, and I have put it on, so
the line here from this wick to this wick, we can see that there is an imbalance, so
from here to here, price is likely to refill that before continuing. However, if we
also see a push down BOS and

We
can see that after tapping into the OB, we rebalanced that area of inefficiency and
moved on.
 As
can be seen from this price movement, there has been a low, high, low, and a high.
Every time we reach a low, we sort of draw back. Because all the wicks are sort of
coming together with these downward pushes, which are more noticeable on an
LTF, we can characterize this price movement as efficient. This effective price
action moves in a certain way.
Now that we have a BOS and 3 bearish candles, the imbalance would be visible if
we compared the low of the first candle to the high of the third.
As a result, we can observe that an OB will likewise be present here due to the
arrival of momentum. Price therefore drops all the way here until we eventually
recover, pullback, recover, and rise once more in order to rebalance. Therefore, as
we can see, this wick here completely counterbalances that inefficiency. At this
point, we do just miss the OB, but we could refine it down to a 15m and
participate in that transaction. Therefore, if we look here, we have a low, LH, the
price then impulsively moves up, and we get three consecutive bullish candles.
However, if we look at this candle, which is three candles, and we take the high
and low of this candle, we can see that there is an imbalance. The price then
pushes up and pulls back, just tapping into that imbalance, but there is still quite a
bit of room for refilling. We then BOS, we tap into this imbalance, before
rejecting, we create some liquidity in this region, but then we do tap into it, and we
can see the bottom of the imbalance is here, we have an OB, the price has dropped
down to tap into OB to rebalance that inefficiency correctly, before
continuing.

Once again, we have three candles after tapping in and we can see from here that
the high and low are in line, so this is what is referred to as efficient price
movement. Since bearish candles will certainly form on an LTF’s wick when
prices decline, we may define this as efficient and expect a price increase from this
point. As we did, we can ascend to new heights.
 The
higher this candle to the low, only a little bit of imbalance, but we can see price
wicked down before continuing to the upside.
The high and low, which would be the imbalance price, fall down with this wick in
the following section, but finally we push up before pushing down.
Although imbalances won’t always refill prices to a full 100%, my testing has
shown that if we get an imbalance and it comes down to refilling prices by at least
50%, it may be sufficient to allow prices to continue in the direction we’re looking
at.
Therefore, the price won’t always go up completely.
Another point is that it won’t always happen if we make an impulsive move like
this, thus this is an excellent illustration. In order to equalize it, the price never
goes back down after this abrupt leap up. This only indicates that it can be used at
a later time; not every time they will. Just something to keep in mind, then.
But if we just keep going, we’ll see that we push down, that there are three candles
here with little momentum, and that there is still an imbalance. Price rises to at
least 50% of what I had predicted it would do before continuing to rise, but then
some bullish pressure appears, and this is the imbalance I had previously
mentioned. There is a lot of buying pressure at this point, and the price never
descends to test it; instead, it keeps rising.

However, if we go on, we can see that after pushing up, we have 1 candle here,
which would be a little bit of an imbalance on an LTF, but after this sort of move
up, we have imbalance, price comes down to mostly mitigate it, so in the end,
most of this move is efficient.
Then, we have an impulse out breaking structure with a slight imbalance that the
price fills in. We also have effective price action with these wicks, but we do have
an OB. Price eventually started to decline after tapping into that OB, then we
tapped into the last down counter, which is located here, before moving on.
 And
the price situation is exactly the same. In order to respect the OB, we tapped in
after refining the last down candle to this candle here. Since we are obviously
bullish on this pair, we are not approaching the HLs and we are respecting the OBs
that are forming here, even though this move is efficient and has little momentum.

The
imbalance between the high and low of this candle, which we have again, is to the
upside. Price drops to rebalance, we tap into the OB and can see that we tap in
three or four times, we push off, and then we come back down to mitigate to the
50% or just below 75% of the OB before moving forward.
 The
next imbalance would be from this wick to this wick, so the entire move was just
buying. We also had a push down that was containing the move, suggesting that
this candle was most likely a news candle.

This
is all efficient, we can see how the wicks are matching, they are meeting with each
sort of move and 3 candles here, wick to wick, it’s efficient price action.
 So
moving on, we have here sort of 3 candles, this imbalance price comes down
perfectly, which is more likely to be seen in an LTF, but we come to balance price,
we push up, push back down, and then we have an imbalance here, price comes up
but then ultimately just breaks right through it impulsively.
Next, we have an imbalance, and this imbalance is also obvious because the price
is falling.
Moving on, we BOS, the high and low price comes down to mitigate, pushes
backup, and then we do see price move to the downside. However, as price moves
to the downside, we can refine the most recent up move to this candle, where price
tapped into an OB, and if we want to claim that there was an imbalance, we can
argue that it was from this low to this high, a slight imbalance, but we still come
up to refill that.
 Now
that we have an imbalance, a lot of buying pressure comes down, pushes off, and
then we fill it all here. We reject off of this OB, we wick below, and this wick was
ultimately just trying to refill this large move here, and as we can see, we do fill
around 50% of it. As I mentioned earlier, 50% is a good sort of level where it likes
to rebalance before continuing.
The price doesn’t quite come down to fill it all, but if we keep going, we can see
the next imbalance would be here from this low to this high. We do BOS, we have
a little imbalance here. We tap into the OB, we reject it, we tap in again, we reject
it, and then imbalance here.

We
can all understand how strong this is, I’m sure.
Now that there is an imbalance, we descend and an OB forms. We respect it, tap
in, break off, tap in again, leave this imbalance between the high and low, and the
price drops again, possibly as a result of some news. Wick below the imbalance
dipping into an OB, followed by strong upward momentum and a subsequent
decline in price, leaves a small amount of imbalance. As a result of the price swing
and the OB that resulted from it, we have a slight imbalance in the market. In
addition, there are many sellers entering the market. Therefore, there is an
imbalance from the candle’s low to its peak. Price increases once more, and
although we narrowly miss the OB, we may refine down to the 15-minute chart
and enter this trade there.
Now that we have imbalances, all we need to do is use them as extra
confluence when analyzing a trade; nevertheless, I never advise trading only
on imbalances because there are simply too many other factors to consider.
 So,
if we consider this to be a pushdown, a pullback, and a new low, 1 hour. Thus, this
would be our LH, from which we may try to obtain short. The imbalance from
here to here can now be used as just another confluence. Therefore, even though
we just failed short of the OB, price is now efficient as we have rebalanced this
move, so we can still take advantage of this trade. If we were to push down come
back up and rebalance this move, but failed short of this OB, as we can see we did
before we put in a new low.
HOW DOES PRICE ACTION ANALYSIS WORK?
The price’s movement on the chart is the subject of the Price Action Analysis. The
candlestick format clearly depicts price action, which I mean the actions of buyers
and sellers during that time period. In CANDLESTICK, their activity is clearly
visible. Therefore, in order to understand price action, we must first understand the
five steps to candlestick analysis, which are
Step1: From high to low, the size of the body

Narrow, Average, Wide.

Find the main portion of your timeframe. The candle body conveys a lot of
information, such as:
A long body indicates strength;
A narrow body indicates weakness;
Consecutive bodies increase momentum by becoming larger and larger;
Consecutive bodies decrease momentum by becoming smaller and smaller;
Up or down moves with greater than average body candles indicate high
volatility.
How to compare?
Current candlestick in relation to the previous candle.
Current candlestick with relation to the same swing.
Current candlestick in relation to the previous swing
Step 2: The length of the wick.
Larger wicks indicate that the price moved a lot during the candle but was
rejected. This indicates that there is either supply or demand at major
support and resistance levels.
The candlewick expands, indicating volatility. This typically occurs after
prolonged trending phases, prior to a reversal at the support and resistance
levels.
Prices are more likely to move in the opposite direction of the shadow the
longer the shadow is.
Long wick candles do not always indicate a reversal.
If the wick of a rejection candle is engulfed by a subsequent move, it is
referred to as reverse rejection. If it appears in between the trend, it is
referred to as trend cont. as a little pullback in a more modest time span)

While a solitary long lengthy wick shows potential costs moving the other
way of the wick, a bunch of numerous wicks demonstrates that costs are
probably going to move in a similar heading of the wick made and assuming
the body shuts the bearing of the pattern
Step3: The ratio of wicks and bodies
Recognizing the relationship between the open and close prices in relation to the
high and low of the current bar
price indicates where the balance between buyers and sellers was at the
beginning of that period.
Close price indicates where the balance point was at the end of that period
WYCKOFF BASIC LAW
1) The law of supply and demand:
States that when demand is greater than supply, the price will rise to meet this
demand, while when supply is greater than demand, the price will fall.
2) The law of cause and effect
A small amount of volume movement will only result in a small amount of price
movement, or the effect will be indirectly proportional to the cause.
3) The law of effort versus result:
If the cause is large, then the effect will be large as well. similar to the third law of
Newton. In other words, the price action on the chart must reflect the volume
action below. Every action must have an equal and opposite reaction.
Wide spared candle

Price action – Strong bullish market sentiment is seen as the result (price), where
effort (volume) was validated. The price action has risen significantly and reached
or close to the up candle’s high.
Volume Action: As a result, the volume that is associated with this strong
sentiment ought to have a “strong” volume. As can be seen in the preceding
illustration, the price will be confirmed if the volume is higher than average (effort
vs. result). Everything is as it should be, and the smart money is joining the
upward trend.
This is a warning sign if the volume is lower than average or below average. The
price is being marked up, but it doesn’t take much effort. This is not a genuine
move. We attempt to leave whenever we are in a position. We stay out and wait for
the next signal if we are not in a position to see when and where the smart money
is currently taking this market.
Narrow spread candle

Price action indicates a weak sentiment in the market.

Volume action
Indicates that a narrow spread candle should have low volume.
CANDLE WITH A SMALL SPREAD AND A HIGH VOLUME. How can the
spread be narrowed if the volume represented buying? On a very high volume, a
narrow spread-up candle has only two possible causes.
Either the professional money is buying into the selling (see the end of a rising
market) or there is a trading range to the left, and the professional money is ready
to take on the selling from traders who are stuck in this old trading range.
Step 4:
RELATIVE OR 2 CANDLE PRICE ACTION
DIRECTION OF CANDLE
The relationship of each bar’s high and low to the bar before it is shown.

An up bar starts an upswing and confirms the end of a downswing.

A down bar starts an upswing and confirms the end of a downswing.
Since the inside bar does not break the previous high or low, it does not
affect the direction of the current swing.
 On the other hand, if the outside outside bar controls the upswing while the
outside bar controls the downswing. A price swing typically does not end or
begin with an outside bar unless there is a down bar or a break below the
swing low. An upswing will follow the direction of the trend with regard to

candle.

A candlestick must always be viewed within the context of previous events.

Context is what the current candlestick shows with respect to the previous
candlestick
Is the current candlestick larger or smaller than the previous ones? Which
indicates momentum increases or decreases?
Does the size-change have any significance? Buying or selling pressure
Volatility goes up or down

Does the change occur during a period of active trading? Candlesticks, for
instance, are typically dead or inactive in the middle of a period.

TESTING PRICE LEVELS

The term “testing” refers to the process by which a market moves toward a price
level in order to “test” whether or not the price level will accept the market’s
advances.
 The
wick typically functions as a zone of supply and demand, and the high and low of
each price bar are natural support and resistance levels. For interpreting price
action, the test of these levels or zones is crucial because it reveals the market’s
undercurrents.

THREE PRICE BARS/expectation

With a clear understanding of the two-bar price action (directional, contextual, and
testing), we can expect the market in the third candle. Based on our interpretation
of the price action in the previous two bars, we would expect that the market
would move in a particular direction in the third bar. Our price action analysis is
enhanced by the confirmation or failure of our expectations for the third bar.
 We need to make a
simple assumption about how the market should and shouldn’t behave in order to
form expectations. The market basically has momentum and inertia. Bullishness
ought to be followed by bearishness, and bearishness ought to be followed by
bullishness. We need to exercise caution whenever it deviates from this
assumption because it might signal a shift in the direction of the market.
 Section 4

SMART MONEY CONCEPT SUPPLY AND DEMAND

The price goes through the following phases:
ACCUMULATION
REACCUMULATION
UPTREND
DISTRIBUTION
REDISTRIBUTION

DOWNTREND
ACCUMULATION smart money removes the floating supply of stock by buying,
which is called .
TREND UP smart money aggressively moves prices up.
DISTRIBUTION SM will take advantage of the higher prices obtained in the rally
to take profits by beginning to sell the stock back to the uninformed
traders/investors LAWS OF SUPPLY AND DEMAND Trading
All financial markets operate on the universal law of Supply and Demand. The
structure of the market is the Supply and Demand Zone
Law of Demand– The higher the price of an item, the fewer the demand (buyers
don’t want to buy at a higher price) and the lower the price, the higher the demand
(buyers want to buy at a low price)
Law of Supply: the higher the price, the higher the supply (sellers want to sell at a
higher price) and the lower the price, the lower the supply (sellers don’t want to
supply at a lower price)
What are Supply and Demand Zones?

Supply-demand is nothing more than the border area of support or resistance

In the chart above, you can see a demand zone (broad support level) and a supply
zone (broad area of resistance).
What we want to find in price zones where supply outpaces demand and supply
outpaces supply.
The first is referred to as SUPPLY ZONES. The price will fall when the market
enters SUPPLY ZONES. Shorting the market can then help you earn money.
The market DEMAND ZONE is the latter. The price will rise if demand continues
to support it. After that, you can make money from a long position.
Pullback testing from the demand zone allows you to go long.
How to Find Supply and Demand Zones in Trading
There are two steps to identifying supply and demand zones. If the supply zone is
broken, it becomes a demand zone.
Take a look at the chart and try to spot a series of large candles.
Establish the base, usually a sideways price action area, from which price
started the quick move.
Different types of supply and demand formation
There are different supply and demand zone patterns. It is important that price
moves a lot. The following are some of the most well-known ones:
TREND CONTINUOUS BASE
RALLY BASE RALLY(RBR)
DOWN BASE DOWN (DBD)
TREND REVERSAL BASE
RALLY BASE DROP (RBD)

DOWN BASE RALLY (DBR) And the FLIP ZONE

NOW PUTTING ALL THIS INTO NIFTY 50CHART

STRENGTH OF SUPPLY AND DEMAND ZONE

How did the price leave the level? STRENGTH OF THE MOVE

The
Logic: The stronger the price moves away from a zone, the more out-of-balance
supply and demand are at that zone. A heavy order is placed by smart money
How much time did the price spend at the zone? TIME AT LEVEL
The Logic: The less time price spends at a zone, the more out-of-balance supply
and demand are at the price level. Smart money aggressively entering
At price levels where supply and demand are more out of balance. The price will
spend at least amount of time at the level.
How far did the price move away from the zone before returning back to the zone?
The Logic: The farther price moves away from a zone before returning to that
zone, the greater the reward to risk and probability.

We
know where the buyers (demand) are and, more importantly, where they are not
when the price returns to that supply level for our short entry.
How many times is the price approaching the zone? FRESHNESS OF BASE

First-time stock retrace to the base is the strongest to enter

When does supply and demand break?
Supply and Demand levels eventually break after a zone is tested multiple times or
during a strong move. due to either an overwhelming number of orders in the
opposite direction breaking the level or the remaining orders being triggered and
gradually removed.
Price action:
A strong move to the zone may break the zone.
Low volume test will confirm the zone.
If the price stays near or at these zones and doesn’t fall much, then there is a
high probability that they will break the zone.
HOW TO ENTER DEMAND AND SUPPLY WITH PRICE ACTION:
Any reversal price action signal on trading time frame (TTF)
Entry in the direction of the dominant trend
Suppose context downtrend, price rally to supply zone on TTF, then any
bearish reversal PA signal for an entry short
Also, notice the volume on these reversals. Wait for the price to come to this
level. A test with low volume is a good sign, and these are very likely
trades.
Find the SD zone on HTF (HIGHER TIME FRAME).
Trading tips
The supply and demand zone for day trading is the previous day’s high and low.
Take a look at the price action in that area to see if these zones are being accepted
or rejected.
As an illustration.
Locate the supply and demand zone on a longer time frame. On an hourly time
frame, we locate the zone.
The big picture shows
1. which side we want to be on, whether the trend is up or down
2. Where are the overall levels of support and demand?
When the price approaches the demand zone.
We want to see a sign of strength in the price action in order to confirm the zone’s
1. Momentum loss (DECREASING CANDLE RANGE AND BODY
2. Lower wick
 3.
MIX OF BOTH RED AND GREEN CANDLE

Entry on the trading time frame

ENTRY SIGNAL CANDLE

Candlesticks at Supply and Demand
PIN BAR
ENGULFING
OUTSIDE CANDLE
Odds Enhancers example
Trade with the trend
If INDEX AND SECTOR SHOWS POSITIVE THEN GO LONG FROM
DEMAND ZONE
 Section 5

HOW TO TRADE ORDERBLOCK

Identifying your higher time frame bias is the first step in trading order
block. Regardless of whether you want to trade intraday or swing, you need
to know which way the market is moving for the pair you’re focusing on.
Particularly you need to recognize order block from week by week down to
the hourly and work off there. However, as you get more experience, you
might discover that you can trade intraday by using lower time frames with a
short-term directional bias and finding entries on even lower time frames. In
either case, the idea is the same.
The three things we look at before entering are:
1. examine the overall structure of the market (bearish or bullish, higher
highs and lower lows or lower highs and lower lows), bearish or
Bullish.
2. According to higher timeframe trends, look for supply and demand
zones. For instance, if the higher timeframe trend is a down trend, look
for supply zones; if you’re in a bullish market, look for demand zones.
3. Look at the lower timeframe and look for confirmations in the lower
timeframe (this could be a reaction to the four-hour order block or an
order block forming on a lower timeframe within the higher time POI).
DRAWING AN ORDER BLOCK OR AREA OF SUPPLY AND
DEMAND, WE USE THE LAST OPPOSING CANDLE BEFORE THE
BIG MOVE AWAY FROM A SWING HIGH OR SWING LOW.
Example 1
Example 2
Advanced example
You’ll get the same results either way, but it all depends on your tolerance
for risk and how well-versed you are in trading. You can trade how you want
to, and you don’t have to follow everyone else. You need to know what
makes you happy and what makes you feel at ease.
Important note for determining the best order block
Before making an OB, make certain that the price break structure is in
place.
The price is always drawn to such areas because liquidity always lies
at equal highs and lows.

As you can see from the diagram above, retail traders saw a possibility for
shortening. As a result, institutional banks pushed the price higher to get
liquidity from everyone who was selling at a resistance area.

Here’s what happened when we scaled down on a shorter time frame than
we had before the break.
Always confirm whether your order block is located at a lower or higher
price. The primary goal is to sell higher and buy lower 4. Order blocks
resting above or below the liquidity zone are more likely to hold, making
them favorable trading locations.
SETUP 1
SH+ BOS+ RTO
SHS+BOS+RTO
WYCKOFF SCHEMATICS (ADVANCED)
KEYWORDS
SH – STOP HUNT/MANIPULATION
BOS – BREAK OF STRUCTURE
RTO – RETURN OF ORIGIN/ RETURN TO ORDER BLOCK
SHS – SHIFT IN MARKET STRUCTURE

SH+BOS+RTO SETUP
Notice from the SH+BOS+RTO example, price returned to RTO but the
RTO STOPPED HAUNTED MANIPULATED some EQL Equal lows and
made a BOS that area forms a potential OB and we can look for the same
setup around that area.
Another thing to observe is the imbalances price made after an SH this will
give a more valid reason for price to RTO in order to fill in the balances

This can be seen at any time, but to get the most out of the SH+BOS+RTO
SETUP, keep in mind the HTF bias.
SHS+BOS+RTO SETUP
ACCUMULATION SCHEMATICS
DISTRIBUTION SCHEMATICS
If you look closely into the schematics, you will notice that we have a
SH+BOS+RTO
SETUP

We typically do not trade Wyckoff because it assists us in determining

whether the market is distributing or accumulating. The two setups that we
previously studied are the ones that we always look for when we are looking
for potential setups.
Looking closely at the schematics we have an SH+BOS+RTO SETUP

BACK TESTING ALL OF WHAT IS TEACHED HERE IS VERY

IMPORTANT, AND WHEN IT COMES TO RISK MANAGEMENT, YOU
WILL NEED TO CALCULATE YOUR POSITION, SIZING BEFORE
TAKING A TRADE BECAUSE THE STOP LOSS VARSIES ON EACH
AND EVERY SETUP.
DISCOUNTED PRICE
Utilizing the FIBONACCI to assist in identifying ORDERBLOCKS, we will
examine DISCOUNTED PRICE and PREMIUM PRICE in this section. The
50% level will most likely hold when searching for significant levels or
areas of interest using the Fibonacci.
In the diagram above, we can see that there are two order blocks and some
imbalances, indicating that banks and market makers were involved in this
significant upside move. Choosing which order block will hold is now
necessary.

If we look at the diagram above, we can see that if we use the Fibonacci tool
from the most recent swing low to swing high, both AOI (areas of interest)
are below the 50% level. This indicates that the price will be discounted; in
order to enter the market, we will need to observe how the price reacts when
it reaches these levels.
Take a look at the movements of candles reveals that the price is currently
staying within that range. We are now able to enter.
Before investing money in this, don’t forget to test again and again. It has a
typical win rate of 78%, which should definitely result in a profit over time.
Before planning your setups, always picture that retail minds are considering
a setup. AREA’S OF LIQUIDITY ARE ALWAYS ATTRACTED TO
PRICE.
 Section 6

MARKET STRUCTURE With Respect To Volume Spread Analysis

Volume Spread Analysis in Trading Let us comprehend the formation of bullish
trends in relation to volume spread analysis.

Price goes through four phases: The bearish trend changes into the bullish trend.
Phase A is stopping the previous bearish trend; Phase B is building the cause
(accumulation); and Phase C is testing for confirmation (testing supply after
accumulation). D bullish trend out of range.
We will come to this market structure later just understand the overall concept
How to analyze volume activity on the chart
By using volume spread analysis (VSA), and volume price action (VPA) which we
talked about in the previous book.
Let’s understand how to differentiate the different types of volumes.
Average volume.
Below average volume.
High volume.
Ultra-high volume.
We have four types of volume. Let’s look at the chart to understand
Volume always moves in cycles.
Rule -: Mountain Peaks can be visually compared to determine the structure of
volume peaks. The key is having a clear understanding of the peak’s structure. The
following are characteristics of volume peak:

Rising Volume- Peak (Highest Point)- Falling Volume

Average and Above Average Volume: The highest volume in the current session
is Above Average Volume, which is higher than the average volume but lower than
the previous peak Volume. The volume that coincides with the Moving Average 20
of the volume indicator.
High volume and Ultra-high: Is called the Average Volume. High volume is the
same as the volume of the previous pick. The session’s highest volume setting is
Ultra-High Volume. It surpasses the prior peak volume.
Bearish and Bullish Volumes

Bearish volume is highlighted in red, indicating activity that is bearish. Bullish

Volume is set apart in green and it shows bullish action. If demand volume is
greater than supply volume then overall bullish volume
Volume spread analysis (VSA) in trading
In volume spread analysis involves a few facts that are necessary for chart
analysis. These are the facts:
Price movement
Volume (the level of trading)
The relationships between price movement and volume (harmony or divergence)
The amount of time it takes for each movement to take effect.
Components of volume spread analysis.
The Volume (activity)
The Spread (the price bar’s range)
The Close (the current bar’s closing price)
Spread: The spread is the difference between the price’s opening and closing. For
more examples, see the diagram below.
Volume: The activity of the frequency of price changes during a given time period
is called volume.
Close: The location of the balance point at the end of the period is indicated by the
close price.
Upside move with respect to volume
The smart money has no interest in the upside – Low volume.

Smart money is selling into the public buying – Higher volume.

SIGN OF STRENGTH BASED ON VOLUME SPREAD ANALYSIS

Re
call the market structure that we have discussed above
What does the sign of strength mean here. The downtrend’s stopping action.
Phase A. Stopping the previous bearish trend, which is a sign of strength.
Remember the volume interpretation once more.
Smart money has no interest in the upside – Low volume.
• Higher volume is being sold by the smart money into the public buying.
The classic fallacy of “Smart Money
Now we have found two important rules for volume spread analysis
Rule Number 1: Weakness shows up on an up candle. When it arrives, supply
appears on an upward candle.
Rule 2: Strength Shows Up on a Down Candle. When it comes, demand is like
a down candle.
The end of the downtrend is suggested by some volume spread analysis. These
are:
Selling climax
The end of the declining market
Stopping volume
We will now discuss these three points.
What exactly is a selling climax?
This state indicates that a particular downtrend is coming to an end. This panic
selling by retailers (or the general public) results in an extreme widening of the
price spread and an increase in volume. This action may take place over the course
of one day or over a number of days, and it is matched by buying (demand) of the
following items:
Experienced smart money
Big interests
The classic signs of a selling climax are:
There must be a reversal of the trend. (after a significant extended down move on
the time frame of interest )
The trend will accelerate to the downside with wide spreads down closing in the
middle or high.
Frequently occurs one more than one bar
Must be tested before entry
Volume expands dramatically
A selling climax is generally followed by a secondary reaction why?
After selling climax there are two possible outcomes:
Either professional money is BUYING into the SELLING (see the end of a
DOWN market).
To the left and, there is a trading range OR technical support level. trend
continuation)
First, let’s determine whether there will be a trend continuation following the
selling climax.

If
buying during the Selling Climax was primarily done to temporarily support prices
and check a panic or alleviate a panicky situation, this support stock will continue
following a technical bounce from support. If there is sufficient price supply to
propel prices past the peak-day lows and initiate a new decline, also known as a
resumption of liquidation.
Trend reversal after selling the climax
Following a technical rally, if prices test the climax low with decreasing volume
and hold around or above the climax lows, then we have support and the
liquidation process is over. If the “test” is successful, we can expect higher prices,
particularly if the test is on low volume and narrow spread down bar into the same
area where you first saw the very high volume. This tells us that there is neither
selling pressure nor supply—that is, there are no additional sellers. As shown on
the right side of the image, this is an obvious conclusion that the market is going
to rally. This is a strong signal to buy.
Time to Buy in the Market: AFTER THE TEST
Look for the selling climax
Wait for the successful test (lower volume and narrower spread)OF the
selling climax Day low
Any reversal candlestick pattern (such as an engulfing, outside bar, or pin
bar)
Buy above that candle

STOP LOSS below the low

Stopping volume
What is stopping volume?
It is the volume of smart money entering the market that must overcome supply
In order to stop a down move. At this point, the selling pressure has become so
great that even the smart money entering the market does not have enough muscle
to stop the market from falling further in one session. Similar to our tanker, it takes
two or three sessions for the brakes to kick in.
Characteristics of stopping volume
After a prolonged down move, the volume significantly expands. Bar close to mid
or high and body narrow (lower shadow) Frequently occurs on more than one bar.
If the volume had represented SELLING, how could the spread be narrow if the
first bar close was low? The second bar close could be middle or high
Two possible outcomes after seeing stopping volume
A narrow spread DOWN-day with very high volume has only two possible
outcomes.
Either professional capital is buying into the selling (see the end of a down
market) or it is selling.
The professional money is prepared to absorb the buying from traders in the
support region because there is a trading range to the left.
Trend reversal following the observation of the stopping volume
We can expect higher prices if the “test” is successful, particularly if it is
conducted with low volume and a narrow spread down bar into the same region
where you initially observed very high volume. This is a strong signal to buy.
 How
should you trade when you see stopping volume?
Time to Buy Market After Test If the day ends at its lowest point, you must now
wait to see what happens the following day.
If the next day is level or up, then there must have been buying the day before.
On LOW VOLUME narrower spread, wait for the market to return to the area of
stopping volume. The time to buy the market is when we begin to trend upward.
any candlestick pattern that reverses (like an engulfing, outside bar, or pin bar).
This demonstrates that neither sellers nor supply exists. Buy above that candle;
STOP LOSS below the low.